NL: One-stop insurance shopping questioned

[ST. JOHN'S, NL] - A national association of financial advisers is criticizing the province for passing legislation it says compromises protection for consumers. Under a new piece of legislation, known as Bill 11, credit unions in this province are permitted to sell wealth insurance to any consumer, a move the Financial Advisers Association of Canada says puts consumers at risk.

The group, known better as Advocis, has issued a statement warning consumers in this province to be careful about how much business they do with the credit unions.

“This is a disappointing move on the part of the Newfoundland and Labrador government,” said Greg Pollock, president and CEO of Advocis, who points out the primary concern is that one financial institution will have all of a consumer’s personal and banking information. “Do you really think that someone who fails a medical for life insurance is going to qualify for a small-business loan? I think not,” Pollock said in the statement.

The second concern raised in the statement was about tied selling: where a consumer is pressured into buying one product, in this case insurance, because they’re buying another service such as a mortgage. Pollock wonders if the customer be able to walk away and get a second opinion. “One-stop shopping is not always the best option,” said Pollock.

While an official from the Newfoundland and Labrador Credit Union wasn’t available for comment, Kevin O’Brien, minister of government services, the department that regulates insurance sales in this province defended the move. He says national and federal banks can all sell insurance to people choosing their banks for mortgages and other banking needs, so he understands that the credit unions - which are regulated by the provinces - would also want the right to do so. “We took all those kinds of aspects when we did a review of that legislation,” says O’Brien of the concerns raised by Advocis. “We had conversations with the insurance industry, we had conversations with the credit unions.”

Today, credit unions can sell insurance to members who have mortgages and the like, but Bill 11 removes some of the red tape in bundling insurance with other bank products, or selling insurance to non-members. “You (couldn’t) walk in off the street and say I want to buy some life insurance,” O’Brien says.

O’Brien says consumers will still have the right to buy insurance from any institution. “We’re not saying that a member of the credit union has to take the wealth insurance from the particular credit union that they’re a member of,” he says.

When it comes to tied selling, O’Brien is quick to point out that there is legislation allowing government to prosecute companies forcing consumers to buy packaged products.